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DECISION

On a number of financial mechanisms and policies applicable to investment projects under the clean development mechanism

THE PRIME MINISTER

Pursuant to the December 25, 2001 Law on Organization of the Government;

Pursuant to November 29, 2005 Investment Law No. 59/2005/QH11;

Pursuant to November 29, 2005 Environmental Protection Law No. 52/2005/QH11;

Pursuant to August 28, 2001 Charge and Fee Ordinance No. 38/2001/PL-UBTVQH10;

At the proposal of the Minister of Finance,

DECIDES:

Article 1.- Subjects and scope of application

This Decision provides for investment projects under the clean development mechanism and a number of financial mechanisms and policies applicable to these projects (below referred to as CDM projects for short).

Article 2.- Interpretation of terms

In this Decision, the terms below are construed as follows:

1. CDM project is an investment and production project under which new, advanced and environmentally friendly technologies are applied, and for which greenhouse gas emissions reductions are approved or registered and are certified by the CDM Executive Board (set up and authorized to supervise CDM projects by countries joining the United Nations Framework Convention on Climate Change).

2. Greenhouse gas emission means the emission of climate change-causing gases under the control of the Kyoto Protocol, including CO2, CH4, N2O, HFCs, PFCs, SF6 and other gases.

3. Certified emissions reductions (CERs) means those granted by the CDM Executive Board for CDM projects. A CER is equivalent to one ton of CO2 reduction.

4. The validity duration of a CER is specified by the CDM Executive Board upon grant of that CER.

5. The time of complete transfer of a CER means the time the CER sale agreements have been completely realized and the seller has received money from the buyer.

6. Competent national agency in charge of CDM means the Ministry of Natural Resources and Environment.

Article 3.- Domains in which CDM projects are formulated and executed

1. Domains in which CDM projects are formulated and executed include all economic sectors which bring about greenhouse gas emissions reductions, specifically:

a/ Raising of the use efficiency, conservation and saving of energy;

b/ Exploitation and application of renewable energy sources;

c/ Change of the use of fossil fuel to reduce greenhouse gas emissions;

d/ Recovery and use of associated gas from oil fields;

e/ Recovery of methane (CH4) from dumping grounds or coal mining pits for destruction or for power generation or daily-life use;

f/ Forestation or reforestation for increasing absorption and reduction of greenhouse gas emissions;

g/ Reduction of methane (CH4) emissions from cultivation and husbandry activities;

h/ Other domains which bring about greenhouse gas emissions reductions.

2. The Ministry of Natural Resources and Environment shall guide in detail domains in which CDM projects are formulated and executed as specified in Clause 1 of this Article.

Article 4.- Forms of formulating and executing CDM projects

CDM projects are new investment projects, intensive investment projects or extensive investment projects which bring about greenhouse gas emissions reductions, taking the following forms:

1. Domestic investors formulate CDM projects, and contribute capital in cash or other lawful assets for execution of CDM projects in Vietnam;

2. Foreign investors formulate CDM projects, and transfer capital or technologies into Vietnam for execution of CDM projects.

3. Domestic and foreign investors employ consultants to formulate CDM projects and execute by themselves or execute in joint venture CDM projects in Vietnam.

Article 5.- Conditions on a CDM project

1. A CDM project must satisfy the following conditions:

a/ It is formulated in accordance with the current investment law, ministries', branches' or localities' development strategies or plans, and contributes to Vietnam's sustainable development;

b/ It is formulated and executed by the investor on the basis of voluntariness, and observance of Vietnamese laws and treaties to which Vietnam is a contracting party;

c/ It is feasible with advanced technologies and suitable financial sources; it does not use official development assistance (ODA) or state budget investment capital so as to get CERs for transfer to overseas CDM project investors;

d/ It brings about real and additional greenhouse gas emissions reductions which are measured, inspected and supervised according to specific plans;

e/ It has an environmental impact assessment report;

f/ It has been registered with and approved by the CDM Executive Board;

g/ The process of project execution does not give rise to new responsibility on the part of the Vietnamese Government, compared to the responsibilities defined in the Kyoto Protocol;

h/ It is formulated in a proper order and according to procedures prescribed for a CDM project, for which it is granted a letter of certification or a letter of approval by the Ministry of Natural Resources and Environment.

2. The Ministry of Natural Resources and Environment shall guide the implementation of the provisions of Point h, Clause 1 of this Article.

Article 6.- Rights and obligations of CDM project-formulating and -executing investors

1. Investors that formulate and execute CDM projects in Vietnam are entitled to:

a/ Incentives in terms of tax; land use levy or land rent; fixed asset depreciation; or state investment credit under the provisions of this Decision.

b/ Price subsidies on CDM projects' products in priority domains;

c/ Financial supports in project formulation in accordance with current provisions of law;

d/ Sell CERs under their ownership according to current provisions of law.

e/ Get access to information relating to the setting of CERs selling prices.

f/ Priority in the consumption of CDM projects' products over products of the same kind which are not produced by CDM projects.

2. Investors that formulate and execute CDM projects in Vietnam are obliged to:

a/ Register with tax agencies for enjoyment of tax incentives when putting projects to operation.

b/ Register with the Vietnam Environmental Protection Fund the CERs granted for CDM projects by the CDM Executive Board.

c/ Fulfill financial obligations for CDM projects according to regulations and pay fees in accordance with Article 9 of this Decision and the provisions of law on charges and fees.

d/ Have their CDM projects supervised by competent agencies or organizations according to regulations.

e/ Report to the competent national agency in charge of CDM on the operation of projects and recipients of CERs granted by the CDM Executive Board for CDM projects according to regulations.

Article 7.- Management and use of CERs

1. CERs come under the ownership of CDM project-formulating and -executing investors, and are monitored and managed by the Vietnam Environmental Protection Fund.

The Vietnam Environmental Protection Fund shall monitor and manage CERs granted by the CDM Executive Board for CDM projects executed in Vietnam.

2. When receiving, allocating or selling CERs, CERs owners or recipients shall register the receipt, allocation or sale of CERs with the Vietnam Environmental Protection Fund and report it to the competent national agency in charge of CDM.

Article 8.- CER selling time and prices

1. CDM project-formulating and -executing investors may offer for sale of those CERs to partners that need to buy CERs immediately after receiving CERs or at an appropriate point of time in the validity duration of CERs.

2. CERs selling prices are based on market price at the time of selling.

3. The Ministry of Natural Resources and Environment shall advise, support and oversee the sale of CERs.

Article 9.- CERs sale fees

1. CDM project-formulating and -executing investors that sell CERs shall pay CERs sale fees.

2. CERs sale fees are calculated as a percentage (%) of the proceeds earned by CDM project-formulating and -executing investors from the sale of CERs.

When CERs-owning foreign investors do not sell CERs but transfer them back to their countries in order to fulfill the greenhouse gas emission reduction obligation, they shall pay fees based on the value of their own CERs calculated at market price at the time of transfer.

3. The Vietnam Environmental Protection Fund shall collect CERs sale fees. CERs sale fees are used to cover fee collection expenses; expenses for CDM-related public information activities; formulation and approval of CDM project documents; management and supervision of the execution of CDM projects and other CDM-related purposes in accordance with law; and price subsidies on CDM projects' products in priority domains.

4. The Ministry of Finance shall specify CERs sale fee rates and guide the management and use of CERs sale fees in accordance with Clause 3 of this Article.

Article 10.- Accounting of CDM projects' expenses and incomes

1. Investment and operation expenses of CDM projects and incomes from CDM projects' production and business activities shall be accounted in accordance with current provisions of law.

2. CERs sale incomes shall be accounted as other incomes; CDM project-formulating and -executing investors may either account such incomes as incomes of the year when CERs are sold or allocate such incomes over a number of years under Clause 3 of this Article.

3. CERs sale incomes shall be allocated as follows:

a/ If CERs are sold right in the year when CERs become valid, CERs sale incomes shall be allocated over the duration corresponding to the validity duration of CERs.

b/ If CERs are sold at any time in the validity duration of CERs, CERs sale incomes shall be allocated over the number of years corresponding to the remaining validity duration of CERs.

Article 11.- Fixed asset depreciation

Fixed assets formed under CDM projects are subject to fast depreciation according to the fixed asset depreciation regulations.

Article 12.- Enterprise income tax for CDM projects

1. Enterprise income tax rates, exemption and reduction for CDM projects are the same as those applicable to projects in the domains entitled to special investment incentives specified in Clause III, Section A of Appendix I to the List of domains entitled to investment incentives, enclosed with the Government's Decree No. 108/2006/ND-CP of September 22, 2006, detailing and guiding the implementation of a number of articles of the Investment Law; and in the Enterprise Income Tax Law and its guiding documents.

2. When a CDM project is an extensive investment project, intensive investment project or investment project on supplementation of equipment of an operating production and business establishment, the income increased from new investment is entitled to enterprise income tax incentives specified in Clause 1 of this Article. The production and business establishment shall account separately such increased income for determining the to-be-exempt or -reduced enterprise income tax amount.

3. When a CDM project accounts all incomes from the sale of greenhouse gas emissions reductions as other incomes of the year of sale under the provisions of Clause 2, Article 10 of this Decision, CDM project-formulating and -executing investors may pay enterprise income tax either in a lump sum or on an annual basis in accordance with the enterprise income tax law.

Article 13.- Import tax

CDM projects are exempt from import tax on goods imported for the formation of the projects' fixed assets, materials, supplies or semi-finished products which cannot yet be produced at home and imported in service of the projects' production activities under the provisions of Clauses 6 and 16, Article 16 of the Government's Decree No. 149/2005/ND-CP of December 8, 2005, detailing the implementation of the Import Tax and Export Tax Law, and current legal provisions on import tax and export tax.

Article 14.- Land use levy, land rent

CDM projects are entitled to land use levy or land rent exemption or reduction under current legal provisions applicable to projects in the domains entitled to special investment incentives.

Article 15.- Raising of investment capital

1. Investors may raise capital by cooperating or associating with other enterprises, domestic and foreign economic and financial organizations for formulation and execution of CDM projects.

2. CDM projects which fully meet the conditions specified in the Government's Decree No. 151/2006/ND-CP of December 20, 2006, on state investment credit and export credit, are entitled to state investment credit policies.

3. CDM projects which have been approved or registered by the CDM Executive Board and have signed CERs sale contracts with partners enjoy priority in the consideration and provision of loans.

Article 16.- Price subsidies on CDM projects' products

1. Products of a CDM project are entitled to price subsidies from the Vietnam Environmental Protection Fund if meeting the following conditions:

a/ Being on the list of products of CDM projects in priority domains.

b/ The actual cost of manufacture of products is higher than the actual selling price under the signed contract.

2. The duration for providing price subsidies on products of a CDM project is determined based on the time the project creates products and the capacity to offset expenses for the manufacture of subsidized products.

3. The Vietnam Environmental Protection Fund shall provide price subsidies on CDM projects' products under the provisions of this Decision and the guidance of the Ministry of Finance.

4. The Ministry of Finance shall assume the prime responsibility for, and coordinate with the Ministry of Natural Resources and Environment in, specifying conditions for price subsidies, subsidy levels and subsidy duration for CDM projects' products on the list of products entitled to price subsidies.

Article 17.- Organization of implementation

1. This Decision takes effect 15 days after its publication in "CONG BAO."

2. CDM projects which are formulated and executed before the effective date of this Decision shall register their granted CERs within 90 days with the Vietnam Environmental Protection Fund and report them competent national agency in charge of CDM for monitoring and management. They have the benefits and the obligations specified in this Decision.

3. The Minister of Finance and the Minister of Natural Resources and Environment shall guide in detail the implementation of this Decision.

4. Ministers, heads of ministerial-level agencies, heads of government-attached agencies, presidents of provincial/municipal People's Committees, and heads of concerned organizations and agencies shall implement this Decision.